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| Insurance Law of the People's Republic of China |
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(Adopted at the 14th Meeting of the Standing Committee of the Eighth National People’s Congress on June 30, 1995, promulgated by Order No. 51 of the President of the People’s Republic of China, and amended in accordance with the Decision on Amending the Insurance Law of the People’s Republic of China adopted at the 30th Meeting of the Standing Committee of the Ninth National People’s Congress on October 28, 2002) Contents Chapter I General Provisions Chapter II Insurance Contracts Section 1 General Provisions Section 2 Contract of Property Insurance Section 3 Contract of Insurance of the Person Chapter III Insurance Company Chapter IV Rules Governing Insurance Business Chapter V Supervision and Control of the Insurance Industry Chapter VI Insurance Agents and Brokers Chapter VII Legal Liabilities Chapter VIII Supplementary Provisions Chapter I General Provisions Article 1 This Law is enacted for the purpose of regulating insurance activities, protecting the legitimate rights and interests of the parties involved, strengthening supervision and control of the insurance industry and promoting its healthy development. Article 2 The term of the “insurance” as used in this Law refers to a commercial insurance transaction whereby an insurance applicant, as contracted, pays insurance premiums to the insurer, and the insurer bears an obligation to indemnify him for property loss or damage caused by the happening of a contingent event that is agreed upon in the contract, or to pay the insurance benefits when the insured person dies, is injured or disabled, suffers illness or reaches the age or time-limit agreed upon in the contract. Article 3 Insurance activities conducted within the territory of the People’s Republic of Article 4 Insurance activities shall be conducted in compliance with laws and administrative rules and regulations, with respect for public morality and on the principle of voluntary participation. Article Article 6 Commercial insurance business must be conducted by insurance companies established in accordance with this Law; and no other entities or individuals may be permitted to operate commercial insurance business. Article 7 Any legal persons or other organizations within the territory of the People’s Republic of China that need insurance coverage within the People’s Republic of China shall for the purpose thereof apply to insurance companies established within the territory of the People’s Republic of China. Article 8 Insurance companies shall observe the principle of fair competition in developing insurance business and shall not engage in unfair competition. Article 9 The insurance supervision and control authority under the State Council shall be responsible for supervision and control of the insurance industry in accordance with this Law. Chapter II Insurance Contracts Section 1 General Provisions Article 10 An insurance contract is an agreement whereby the rights and obligations pertaining to insurance are specified and agreed by the applicant and the insurer. The applicant means the party who enters into an insurance contract with an insurer and is obligated to pay the premiums under the insurance contract. The insurer means the insurance company, which enters into an insurance contract with an applicant and is obligated to make indemnity or pay insurance benefits. Article Insurance companies and other entities shall not constrain others to enter into insurance contracts, except for such insurances as have been made compulsory by laws and administrative rules and regulations. Article 12 An applicant shall have an insurable interest in the subject matter of the insurance. An insurance contract is null and void if the applicant has no insurable interest in the subject matter of the insurance. Insurable interest means the legally recognized interest, which the applicant has in the subject matter of the insurance. The subject matter of the insurance refers, as regards the object of the insurance, either to the property of the insured and related interests associated therewith, or to the life and the person of the insured. Article 13 An insurance contract is formed when an applicant applies for and the insurer accepts insurance under the terms and conditions agreed therefore by both parties. The insurer shall issue to the applicant in good time, an insurance policy or other insurance certificate, which indicates the terms and conditions as agreed upon by both parties. An insurance contract may take other written form than as prescribed in the preceding paragraph upon mutual agreement of the applicant and the insurer. Article 14 Once an insurance contract is formed, the applicant shall pay the premium in accordance with the terms of the contract and the insurer shall begin to undertake the insurance liability from the time agreed upon. Article 15 Unless otherwise stipulated in this Law or agreed in the insurance contract, the applicant may rescind the contract after it is formed. Article 16 Unless otherwise stipulated in this Law or agreed in the insurance contract, the insurer may not rescind the contract after it is formed. Article The insurer shall have the right to rescind the insurance contract, if the applicant intentionally conceals the facts and does not perform his obligation of making an honest disclosure, or negligently fails to make disclosure, thereby materially affecting the insurer making a decision whether or not to provide the insurance or whether or not to increase the premium rate. If an applicant intentionally fails to perform his obligation of making an honest disclosure, as regards the insured event, which occurs prior to the rescission of the contract, the insurer shall bear no obligation for indemnification or payment of the insured amount, or for returning the premiums paid. If an applicant negligently fails to perform his obligation of making an honest disclosure and this has a material effect on the occurrence of an insured event, the insurer shall, in connection with the insured event which occurred prior to the rescission of the contract, bear no obligation for indemnification or payment of the insured amount but may return the premiums paid. The insured event means an event falling within the scope of cover under the insurance contract. Article 18 If there are exclusion clauses provided by the insurer in the insurance contract, then the insurer shall make precise and clear explanations in respect thereof to the applicant when concluding the insurance contract, otherwise such clauses shall have no effect. Article 19 An insurance contract shall contain the following particulars: (1) name and address of the insurer; (2) names and addresses of the applicant and the insured, and name and address of the beneficiary in case of insurance of the person; (3) subject matter of the insurance; (4) scope of cover and exclusions; (5) period of insurance and commencement of liability of the insurer; (6) insured value; (7) amount insured; (8) premium and way of its payment; (9) way of payment of indemnity or insurance benefits; (10) liability arising from breach of contract and resolution of disputes; and (11) day, month and year of the conclusion of the contract. Article 20 The applicant and the insurer may include other particulars for matters relating to the insurance contract besides those stipulated in the preceding article. Article 21 During the period of validity of the insurance contract, the applicant and the insurer may amend the contents of the insurance contract subject to mutual agreement. Where amendments to the insurance contract are made, the insurer shall endorse them in the original policy or other insurance certificates, or affix an endorsement slip thereto, or have a written agreement of amendment made with the applicant. Article 22 The applicant, the insured or the beneficiary shall, in good time, notify the insurer the occurrence of an insured event soon after they knew it. The insured refers to one whose property or person is protected by the insurance contract and who is entitled to claim for the insured amount. The applicant may also be the insured. The beneficiary with respect to insurance of the person refers to the one who, designated by the insured or the applicant, is entitled to claim for the insurance benefits. The applicant or the insured may also be the beneficiary. Article 23 Where a claim for indemnity or payment of insurance benefits is lodged with the insurer after the occurrence of the insured event, the applicant, the insured or the beneficiary shall, to the best of their ability, provide the insurer with evidence and other material relevant to ascertaining the nature, the cause and the extent of the loss. Based on the provisions of the insurance contract, the insurer, in considering the relevant evidence or other material incomplete, shall notify the applicant, the insured or the beneficiary to provide supplementary evidence or other material. Article 24 The insurer shall, after receipt of a claim for indemnity or for payment of the amount insured from the insured or the beneficiary, determine the matter without delay, and inform the insured or the beneficiary of the result of the determination. Where responsibility lies with the insurer, the insurer shall fulfill its obligation for such indemnity or payment within 10 days after agreement is reached with the insured or the beneficiary on the amount of such indemnity or payment. If there are stipulations in the insurance contract on the sum insured and on the period within which indemnification or payment should be made, then the insurer shall fulfill its obligation accordingly. If the insurer fails to fulfill its obligations as prescribed in the preceding paragraph in a timely manner then, in addition to payment of the amount insured, the insurer shall compensate the insured or the beneficiary for any damage incurred thereby. No entity or individual may illegally interfere with the insurer’s fulfillment of its obligation for indemnification or payment of the insured amount, or restrict the right of the insured or the beneficiary to receive such payments. The sum insured refers to the maximum amount, which the insurer undertakes to pay for indemnity or for its insurance obligations. Article 25 After receiving a claim for indemnity or payment of the sum insured from the insured or the beneficiary, the insurer shall send to the insured or the beneficiary, a notice declining indemnity or payment of the sum insured for events not falling within the scope of cover. Article 26 If the amount of indemnity or of the payment of insurance benefits cannot be determined within 60 days of receipt of a claim for indemnity or for payment of insurance benefits, together with relevant evidence and information in respect thereof, the insurer shall first effect primary payment of the minimum amount which can be determined by the evidence and material in hand. The insurer shall accordingly pay the balance after the amount of indemnity or of the payment of insurance benefits is finally determined. Article 27 With respect to insurance other than life insurance, the right of the insured or the beneficiary to claim for indemnity or payment of insurance benefits shall lapse if the insured or the beneficiary fails to exercise such right within two years from the date the insured or the beneficiary is aware of the occurrence of the insured event. With respect to life insurance, the right of the insured or the beneficiary to claim for payment of insurance benefits shall lapse if the insured or the beneficiary fails to exercise such right within five years from the date the insured or the beneficiary is aware of the occurrence of the insured event. Article 28 The insurer is entitled to terminate the insurance contract and not to refund the premiums if the insured or the beneficiary lies that an insured event has occurred, and submits a claim for indemnity or payment of insurance benefits, although such insured event has not occurred. If the applicant, the insured or the beneficiary fabricates the occurrence of an insured event on purpose, the insurer is entitled to terminate the insurance contract, and to bear no obligation for indemnity or payment of insurance benefits, and except as otherwise provided in the first paragraph of Article 65 of this Law, not to refund the premiums either. If the applicant, the insured or the beneficiary, following the occurrence of an insured event, fabricates the cause of the occurrence of the insured event or exaggerates the extent of the loss with forged or altered relevant evidence, information or other proofs, then the insurer shall bear no obligation for indemnity or payment of insurance benefits for the portion which is fabricated or exaggerated. The applicant, the insured or the beneficiary shall refund to, or indemnify the insurer for the purpose, payments of insurance benefits or expenses incurred by the insurer due to the commission of any of the acts stipulated in the foregoing three paragraphs of this Article by the applicant, the insured or the beneficiary. Article 29 Reinsurance means the assignment by an insurer of part of its accepted business to another insurer assuming the form of a contractor. At the request of the reinsurance assignee, the insurance assignor shall inform the former of its own liability and all relevant information with respect to the original insurance. Article 30 The reinsurance assignee shall not demand payment of premiums by the applicant of the original insurance. The insured or the beneficiary of the original insurance shall not lodge claims with reinsurance assignee for indemnity or payment of insurance benefits. The reinsurance assignor shall not decline or delay fulfilling its own original obligations by reason of the non-performance of the obligations of reinsurance assignee. Article 31 If there is any dispute between the insurer and the applicant, the insured or the beneficiary, over the clauses in an insurance contract, the People’s Courts or arbitration organizations shall interpret such disputed clauses in favor of the insured and the beneficiary. Article 32 The insurer or the reinsurance assignee shall be obligated to keep confidential all information obtained in the course of conducting insurance business regarding the business, financial position and individual privacy of the applicant, the insured, the beneficiary or the insurance assignor. Section 2 Contract of Property Insurance Article A property insurance contract mentioned in this Section is referred to for short as “the contract” unless specified otherwise. Article 34 Insurer must be notified of the assignment of the subject matter of insurance and after the consent of the insurer to continue the insurance, the original insurance contract shall be altered according to law, but except for cargo insurance contracts and those contracts having otherwise specified. Article Article 36 The insured shall observe all controls of the State pertaining to such areas as fire prevention, safety, production operations and labour protection, to ensure safety of the subject matter of insurance. In accordance with the terms of the contract, the insurer may inspect the safety conditions of the subject matter of insurance and, make timely suggestions in writing to the applicant or the insured so as to eliminate unsafe factors and latent risks. In the event that the applicant or the insured fails to fulfill his contractual obligations to ensure the safety of the subject matter of insurance, the insurer has the right to ask for an increase in the premium or to terminate the contract. The insurer may, with the consent of the insured, take preventive measures to ensure the safety of the subject matter of the insurance. Article 37 If the extent of risk attending the subject matter of insurance increases during the period of the contract, the insured shall, in accordance with the contract, notify the insurer in a timely manner, who shall have the right to ask for an increase in the premium or terminate the contract. If the insured fails to notify the insurer as stipulated in the preceding paragraph, the insurer shall bear no obligation for indemnification where the occurrence of the insured event is caused by the increased risk attending the subject matter of the insurance. Article 38 Unless otherwise specified in the contract, the insurer shall reduce the premium and refund correspondingly the part thereof calculated on per diem basis in either of the following cases: (1) a change occurs in relative circumstances under which the insurance rate was determined, so that the risk attending the subject matter of the insurance is noticeably reduced; or (2) an obvious reduction occurs in the insurable value of the subject matter of the insurance. Article 39 Where an applicant requests termination of the contract prior to commencement of insurance liability, the applicant shall pay service charges to the insurer and the insurer shall then refund the premiums paid. If the applicant requests termination of the contract subsequent to commencement of insurance liability, the insurer may retain the premiums for the period from commencement of insurance liability to the date of termination of the contract, and shall refund the balance of the premiums to the applicant. Article 40 The insurable value of the subject matter of insurance may be agreed by the applicant and insurer and specified in the contract; or it may be determined, at the occurrence of the insured event, on the basis of the actual value of the subject matter of the insurance. The sum insured shall not exceed the insurable value; and the part in excess shall be null and void. Where the sum insured is less than the insurable value, the insurer shall bear obligation for indemnity pro rata of the sum insured to the insurable value, unless otherwise stipulated in the contract. Article Where the amount in aggregate of the sum insured by double insurance exceeds the insurable value, the total amount of indemnity paid by all insurers concerned shall not exceed the insurable value. Unless specified otherwise in the contract, the insurers concerned shall undertake their respective obligation for indemnity in the proportion, which the sum insured by each of them bears to the total amount of the sum insured. Double insurance means such insurance wherein an applicant enters into separate insurance contracts with two or more insurers on the same subject matter of insurance, the same insurable interests and the same insured event. Article 42 At the occurrence of an insured event, the insured is obligated to take all necessary measures to prevent or mitigate loss, or damage. The insurer shall bear all necessary and reasonable expenses incurred by the insured after the occurrence of the insured event in taking measures to prevent or mitigate loss or damage of the subject matter of the insurance; the amount of such expenses borne by the insurer shall be calculated separately from the indemnity for the loss of the subject matter of the insurance and it shall not exceed the sum insured in the maximum. Article Article 44 After the occurrence of the insured event, if the insurer pays in full the sum insured which is equal to the insurable value, the insurer shall retain all rights pertaining to the lost or damaged subject matter of insurance; if the sum insured i
s less than the insurable value, the insurer shall obtain partial rights pertaining to the lost or damaged subject matter of insurance pro rata of the sum insured to the insurable value. Article 45 When the occurrence of the insured event results from the loss or damage to the subject matter of insurance caused by a third party, the insurer may, from the date when indemnity is paid to the insured, exercise by subrogation the right of the insured to demand indemnification against the third party up to the amount of indemnity paid. After the occurrence of the insured event referred to in the preceding paragraph, the insurer may, when paying indemnity, deduct therefrom a corresponding amount, which the insured has received as indemnity from the third party. The right to indemnity by subrogation exercised by the insurer in accordance with the first paragraph shall in no way affect the insured’s right to indemnity against the third party for the portion un-indemnified. Article 46 If the insured waives the right to indemnity against the third party after the occurrence of the insured event and before the insurer pays the indemnity, the insurer shall bear no obligation for indemnity. If the insured, without the insurer’s consent, waives the right to indemnity against the third party after indemnity is paid by the insurer, the waiver shall be invalid. The insurer may deduct a corresponding sum from the amount of indemnity if it is not able to exercise the right to indemnity by subrogation due to the fault of the insured. Article 47 The insurer has no right to indemnity by subrogation against any family member or staff member of the insured unless the occurrence of the insured event referred to in the first paragraph of Article 45 above has resulted from the willful misbehavior of such a party. Article 48 When the insurer exercises the right to indemnity by subrogation against a third party, the insured shall provide the insurer with necessary documents and relevant information known to him. Article 49 The insurer shall bear all necessary and reasonable expenses incurred by the insurer and the insured for the purpose of investigating and ascertaining the nature and cause of the occurrence of the insured event, and the extent of loss or damage to the subject matter of the insurance. Article 50 The insurer may, in accordance with the provisions of law or the terms of an insurance contract, directly indemnify a third party for loss or damage caused him by the insured of a liability insurance contract. Insurance liability means insurance of which the subject matter is the insurer’s liability to indemnify a third party according to law. Article 51 If the insured of a liability insurance contract is brought to arbitration or legal proceedings due to the occurrence of an insured event which caused loss or damage to a third party, the insurer shall bear the cost of such arbitration or legal proceedings and other necessary and reasonable expenses paid by the insured, unless provided otherwise in the insurance contract. Section 3 Contract of Insurance of the Person Article The contract of insurance of the person mentioned in this Section is briefly referred to as “the contract”, unless specially designated. Article 53 The applicant has insurance interest in the following persons: (1) the applicant himself; (2) the applicant’s spouse, children and parents; or (3) apart from the above-mentioned, other family members and close relatives bearing foster or support or maintenance relationship with the applicant. The stipulations in the preceding paragraph apart, the applicant shall be deemed as having an insurance interest in the insured, if the insured consent to the applicant concluding the contract for him. Article 54 If the age of the insured is not correctly given by the applicant, and the actual age of the insured does not fall within the age limit specified by the contract, the insurer may terminate the contract and refund the premiums to the applicant after deducting service charge. However, this does not apply to cases where formation of the contract has been over two years. In the event that the applicant has wrongly given the age of the insured, thus causing him to underpay the premiums, the insurer shall have the right to rectify the mistake and demand the applicant to pay the balance, or when paying insurance benefits, reduce the payment in the proportion which the amount of premiums actually paid bears to the amount that should have been paid. In the event that the applicant has wrongly given the age of the insured, thus causing him to overpay the premiums, then the insurer shall refund the overpaid portion to the applicant. Article 55 An applicant shall not apply for and the insurer shall not provide insurance of the person for one in want of capacity for civil acts, taking death as a condition for payment of insurance benefits. The restriction stipulated in the preceding paragraph does not apply to cases where parents apply for insurance of the person for their minor children. However, the total amount of payments for death shall not exceed the limit prescribed by the insurance supervision and control authority. Article An insurance policy signed and issued pursuant to a contract prescribing death as the term for payment of insurance benefits may not be transferred or pledged without the written consent of the insured. Where parents apply for insurance of the person on their minor children, the restriction stipulated in paragraph one of this Article shall not apply. Article 57 After the formation of the contract, the applicant may either pay the whole of the premiums once for all or pay by installments in accordance with the terms of the contract. If the contract stipulates that the premium is to be paid by installments, the applicant shall pay the first installment at the conclusion of the contract and the other installments as scheduled. Article 58 Where the contract specifies payment of the premiums by installments and the applicant has paid the first installment but fails to pay the current installment despite the lapse of over 60 days from the scheduled date of payment, the validity of the contract is suspended, or the insurer may, in accordance with the terms of the contract, reduce the insured amount, unless stipulated otherwise in the contract. Article 59 The validity of a contract that has been suspended in accordance with the preceding Article can be reinstated upon agreement therefor being reached between the insurer and the applicant and after the making of the outstanding premium payment by the applicant. However, the insurer is entitled to terminate the contract if no agreement has been reached by both parties within two years from the date of suspension of the validity of the contract. Where an insurer terminates the contract in accordance with the preceding paragraph when the applicant has paid the premiums for two years or more, the insurer shall refund the cash value of the policy in accordance with the contract. In the event that the applicant has paid the premiums for less than two years, the insurer shall refund the premiums with the service charge deducted therefrom. Article 60 The insurer shall not resort to legal proceedings to demand payment by the applicant of the premiums in respect of insurance of the person. Article 61 The beneficiary of the insurance of the person shall be designated by the insured or the applicant. The designation of the beneficiary by the applicant is subject to the approval of the insured. If the insured is a person with no capacity for civil acts or a person with limited capacity for civil acts, the beneficiary may be designated by his guardian. Article 62 The insured or the applicant may designate one or more persons as the beneficiaries. In the event that there are more than one beneficiaries, the insured or the applicant may specify the order of priority in their enjoyment of the insurance benefits and their respective proportions; if such proportions have not been defined, all the beneficiaries shall share the insurance benefits in equal proportions. Article 63 The insured or the applicant may change the beneficiary and notify the insurer of this in writing. The insurer shall endorse the change on the policy upon receipt of the notice. The change of the beneficiary by the applicant shall be subject to the consent of the insured. Article (1) where there is no designated beneficiary; (2) where the beneficiary dies before the insured without other beneficiary being designated; or (3) where the beneficiary forfeits or surrenders his rights as such in accordance with law without any other beneficiary. Article 65 When the applicant or the beneficiary has intentionally caused the death, disability or illness of the insured, the insurer shall bear no obligation to pay for the insurance. In the event that the applicant has paid premiums for two years or more, the insurer shall, in accordance with the contract, return the cash value of the policy to other beneficiaries, who are entitled to their rights as such. If the beneficiary has intentionally caused the death or disability of the insured, or attempted to cause the death of the insured, the beneficiary shall forfeit his right to claim insurance benefits. Article 66 Where a contract stipulates death as the term for payment of the insurance benefits, then the insurer shall have no obligation to make such payment if the insured commits suicide, except for the stipulations in the second paragraph of this Article. However, the insurer shall, as regards the insurance premiums already paid by the applicant, return the cash value thereof in accordance with the insurance policy. Where a contract stipulates death as the term for payment of the insurance benefits, the insurer may effect such payment in accordance with the contract if the insured commits suicide two years or more after the formation of the contract. Article 67 Where death or disability of the insured results from his intentional committing a crime, the insurer shall have no obligation to effect payment of the insurance benefits. If, however, the applicant has paid premiums for two years or more, the insurer shall return the cash value thereof to the insured in accordance with the insurance policy. Article 68 Where insured events perils such as death, disability, or illness of the insured in insurance of the person result from acts of a third party, the insurer shall have no right of claim against the third party by subrogation after payment of the insurance benefits to the insured or the beneficiary. However, the insured or the beneficiary shall still have the right to demand compensation from the third party. Article 69 Where an applicant who has already paid in full the insurance premiums for two years or more, terminates the contract, then the insurer shall return the cash value of the policy within 30 days after receipt of the notice of termination; if the applicant has paid the insurance premiums for less than two years, then the insurer shall, in accordance with the contract, return the premiums after deducting the service charge. Chapter III Insurance Company Article 70 An insurance company shall take either of the following forms for its organization: (1) stock company with limited liabi
lity; or (2) solely State-owned company. Article 71 The establishment of an insurance company is subject to the approval of the insurance supervision and control authority. Article 72 To establish an insurance company, the following are required: (1) articles of Association in conformity with this Law and the Company Law; (2) a minimum registered capital as prescribed in this Law; (3) senior management personnel with professional knowledge and experience in business operations; (4) a sound organizational structure and management systems; and (5) business premises conforming to requirements and other facilities relative to the insurance business. When examining the application for the establishment of an insurance company, the insurance supervision and control authority shall take into consideration the development of the insurance industry and the need for fair competition. Article 73 The minimum registered capital required for the establishment of an insurance company is RMB 200,000,000 yuan. The minimum registered capital for the establishment of an insurance company shall be fully paid-up in monetary form. The insurance supervision and control authority may adjust the amount of the minimum registered capital, in accordance with the proposed scope of business and scale of operations; however, the minimum capital shall not be less than that stipulated in the first paragraph of this Article. Article 74 For the establishment of an insurance company, the applicant shall submit the following documents and material: (1) a formal written application giving therein the name, registered capital and the scope of business of the proposed insurance company; (2) a feasibility study report; and (3) other documents and information required by the insurance supervision and control authority. Article 75 Where an application of the establishment of an insurance company has been approved in preliminary examination, the applicant shall begin preparations for its establishment in accordance with this Law and the Company Law. The applicant who meets the requirements of establishment stipulated in Article 71 of this Law shall submit to the insurance supervision and control authority a formal completed form of application together with the following documents and material: (1) articles of Association of the insurance company; (2) a list of shareholders and their shares, or the investors and the amount of their investment; (3) a certificate of the credit standing and relevant information of those shareholders holding 10% or more of the company's shares; (4) a certificate verifying the paid-up capital issued by a statutory institution; (5) resumes and proofs of qualification of proposed senior management personnel; (6) operation strategy and business plan; (7) details of business premises and other facilities related to the insurance business; and (8) other documents and material requested by the insurance supervision and control authority. Article 76 The insurance supervision and control authority shall make a decision approving or disapproving the application, within six months from the date of receipt of the formal application to establish an insurance company. Article 77 An insurance company whose establishment has been approved shall be issued by the approving department a license to carry on insurance business, which shall be used to affect registration with and obtain a business license from the administrative department of industry and commerce. Article 78 The license to carry on insurance business will be invalidated of itself if the insurance company fails to complete its registration without any proper reasons, within six months from the date of receipt of the insurance license. Article 79 Upon its establishment, an insurance company shall deposit 20% of its total registered capital with a bank designated by the insurance supervision and control authority as guarantee fund; this guarantee fund shall not be used except for repayment of debts when the company is liquidated. Article 80 An insurance company that intends to establish a branch office within or outside the territory of the People’s Republic of The branch offices of an insurance company do not possess the status of a legal person; and their civil liability shall be borne by the insurance company. Article 81 Approval by the insurance supervision and control authority is required for the establishment of any representative office of an insurance company within or without the territory of the People’s Republic of Article 82 Approval by the insurance supervision and control authority is required for any of the following changes to an insurance company: (1) change of the name of the insurance company; (2) change in the amount of the registered capital; (3) change of business premises of the company or its branch offices; (4) adjustment of the scope of business; (5) division or merger of the company; (6) amendment to its articles of association; (7) change of investors or shareholders who hold 10% or more of the company's shares; or (8) other changes as specified by the insurance supervision and control authority. An insurance company shall report any changes of its chairman and its general manager to the insurance supervision and control authority for examination of their qualifications for the positions. Article 83 The provisions of the Company Law shall apply to the organizational structure of an insurance company. Article Article Those insurance companies, which include life insurance in their business may not be dissolved, only divided or merged. Article 86 An insurance company shall be eliminated according to law in the event that its insurance license is revoked by the insurance supervision and control authority due to its violation of law, or administrative rules and regulations. The insurance supervision and control authority shall appoint in time a liquidation committee to carry out the liquidation. Article Article Where life insurance contracts and reserve funds, as prescribed in the preceding paragraph, are transferred to or accepted by another insurance company designated by the insurance supervision and control authority, the legitimate rights and interests of the insured and the beneficiary shall be preserved. Article (1) wages, salaries and social insurance expenses due to its employees; (2) indemnity or payment of the insurance benefits; (3) unpaid taxes and duties; and (4) cleaning off the company debts. Where the State is insufficient to cover all the claims having the same order of priority, then settlement shall be made on a pro rata basis. Article 90 When an insurance company ceases its business operations in accordance with law, its license to carry on insurance business shall be canceled. Article Chapter IV Rules Governing Insurance Business Article 92 The scope of business of an insurance company shall be as follows: (1) property insurance, which includes insurance against loss or damage to property, liability insurance and credit insurance; (2) insurance of the person which includes life insurance, health insurance and accident and injury insurance. No insurer may concurrently engage in both the business of property insurance and insurance of the person; however, an insurance company engaged in the business of property insurance may, upon approval by the insurance supervision and control authority, operate the short-term business of health insurance and accidental injury insurance. The scope of business of an insurance company is subject to the approval of the insurance supervision and control authority. An insurance company shall only operate its insurance business within the scope of business approved. No insurance company may concurrently engage in the business other than that provided for by this Law or other laws, or administrative rules and regulations. Article 93 Subject to approval by the insurance supervision and control authority, insurance companies may engage in the following reinsurance business with respect to the insurance business prescribed in the preceding article: (1) outward reinsurance; and/or (2) inward reinsurance. Article 94 Insurance companies shall, in accordance with the principle of safeguarding the interests of the insured and guaranteeing the capability of reimbursement, set aside all liability reserve funds. Specific measures for setting aside and carrying forward the liability reserve funds to be done by insurance companies shall be formulated by the insurance supervision and control authority. Article 95 Insurance companies shall set aside a reserve fund for undetermined indemnities pursuant to claims already made or insurance benefits paid, and to claims not yet made nor insurance benefits paid subsequent to the occurrence of the insured event. Article Article The insurance protection fund shall be under centralized management and used on the basis of overall planning and arrangement. Specific measures for control and use of the insurance protection fund shall be formulated by the insurance supervision and control authority. Article 98 An insurance company shall maintain a minimum solvency commensurate with the size of its business. After deduction of the amount of its actual liability from the value of its actual assets, the balance shall not be less than the amount specified by the insurance supervision and control authority. In the event that the balance is less than the amount stipulated, its equity capital shall be replenished to make up the difference. Article 99 For those insurance companies engaged in property insurance business, the premiums retained for the current year shall not exceed four times the combined total of its paid-up capital and its accumulated fund. Article 100 The liability borne by an insurance company for each risk unit, that is, the liability of an insurance company that might arise from the maximum loss or damage caused by the occurrence of a single insured event, shall not exceed 10% of the combined total of its paid-up capital and its accumulated fund. Reinsurance shall be arranged for the portion in excess of this sum. Article 101 The method of computation of an insurance company and its plan for managing huge calamities in respect of a risk unit shall be submitted to the insurance supervision and control authority for approval. Article 102 An insurance company shall arrange reinsurance in accordance with the relevant provisions specified by the insurance supervision and control authority. Article 103 Where an insurance company needs to put through outward reinsurance business, it shall give priority to insurance companies established within the territory of the People’s Republic of Article 104 The insurance supervision and control authority shall have the authority to restrict or prohibit insurance companies from handling outward reinsurance business with insurance companies situated outside the territory of the People’s Republic of Article 105 An insurance company shall employ its funds in a steady manner, follow the safety principle and ensure that its assets be maintained and increased in value. The employment of funds of an insurance company is limited to bank deposits, bringing and selling of government and financial bonds and other forms of fund stipulated by the State Council. No funds of an insurance company may be employed for the establishment of institutions dealing in bonds or securities or for the establishment of enterprises other than insurance companies. The funds employed by an insurance company and the percentage of the total amount, of funds employed in each specific item shall be prescribed by the insurance supervision and control authority. Article 106 An insurance company and its employees shall not commit any of the following acts in their business activities: (1) deceiving the applicant, the insured or the beneficiary; (2) concealing from the applicant material information relevant to the insurance contract; (3) preventing the applicant from fulfilling his obligation of making a full and accurate disclosure as provided for in this Law or inducing him not to fulfill such obligation; (4) promising the applicant, the insured or the beneficiary to give them premium rebates or other benefits which are not specified in the insurance contract; or (5) settling a false claim by purposely making up an insured event that never happens, to obtain insured amount by fraudulent means.
Chapter V Supervision and Control of the Insurance Industry Article 107 The insurance clauses and premium rates for risks insured that have a bearing on the interests of the public, for risks that are compulsorily insured in accordance with law, and for the newly developed life insurance shall be submitted to the insurance supervision and control authority for examination and approval. When conducting examination before giving approval, the insurance supervision and control authority shall abide by the principle of protecting the interests of the public and preventing unfair competition. The scope of and specific measures for examination and approval shall be formulated by the insurance supervision and control authority. The insurance clauses and premium rates for other insured risks shall be submitted to the insurance supervision and control authority for the record. Article 108 The insurance supervision and control authority shall establish a sound indicator system for supervision and control over the solvency of insurance companies, in order to exercise supervision and control over the minimum solvency of the companies. Article 109 The insurance supervision and control authority shall have the authority to inspect the business situation, financial situation and employment of funds situation of an insurance company, and shall have the authority to request an insurance company to furnish relevant written reports and information within a prescribed period of time. An insurance company shall accept supervision and inspection in accordance with law. The insurance supervision and control authority shall have the power to inquire of financial institutions about the deposits of insurance companies. Article 110 Where an insurance company fails to set aside or carry forward various reserve funds, or fails to carry out reinsurance in accordance with this Law, or seriously violates the provisions of this Law governing the employment of funds, the insurance supervision and control authority shall direct the insurance company to take the following measures for rectification within a prescribed period of time: (1) setting aside or carrying forward various reserve funds in accordance with law; (2) carrying out reinsurance in accordance with law; (3) correcting acts of illegally employing the funds; or (4) replacing its person in charge and relevant management personnel involved. Article 111 Pursuant to the stipulations of the preceding article, in the event that an insurance company fails to correct the situation within the prescribed period, after it has been directed to do so by a decision of rectification of the insurance supervision and control authority, the latter department shall then select insurance professionals and designate relevant personnel from the insurance company to form a rectification task force to carry out the rectification work of the said insurance company. The decision of rectification shall be publicized, giving the name of the insurance company referred to, the reason for rectification, the composition of the rectification task force as well the period of rectification. Article Article Article 114 Where an insurance company under rectification has, subsequent to the rectification, corrected its violations of this Law and has resumed its normal business operations, the rectification shall cease after the report submitted by the rectification task force is approved by the insurance supervision and control authority. Article 115 Where an insurance company violates the provisions of this Law and impairs the public interest of society, by which it might seriously jeopardize or has already jeopardized its solvency, the insurance supervision and control authority may implement a take-over of the said insurance company. The purpose of such a take-over is to adopt necessary measures to protect the interests of the insured and resume the normal operations of the insurance company. The credit-debt situation of the insurance company taken over shall not change as a result of the take-over. Article 116 The composition of the take-over task force and the implementing procedure of the take-over shall be determined and publicized by the insurance supervision and control authority. Article 117 Where the term of the take-over expires, the insurance supervision and control authority may determine to extend it. However, the maximum term of the take-over may not exceed two years. Article 118 Where the term of the take-over expires and the insurance company has resumed its normal operational capacity, the insurance supervision and control authority may determine to terminate the take-over. Where the take-over task force deems that the assets of the insurance company taken over are no longer sufficient to meet its liabilities, the take-over task force may, with the approval of the insurance supervision and control authority, apply to the People's Court to have the said insurance company declared bankrupt in accordance with law. Article 119 An insurance company shall submit its business reports, financial and accounting reports and related Statements for the preceding year to the insurance supervision and control authority within three months after the end of each fiscal year, and publicize such reports and statements in accordance with law. Article 120 An insurance company shall submit to the insurance supervision and control authority its business stati
stics Statements for the preceding month by the end of each month. Article 121 Insurance companies shall appoint and employ actuarial professionals recognized by the insurance supervision and control authority and establish an actuarial report system. Article 122 Insurance companies shall see to it that matters of insurance business are truthfully recorded in the business reports, financial and accounting reports, actuarial reports and other relevant statements, documents and materials and that there are no false records, misleading statements or major omissions. Article 123 The insurer and the insured may employ independent loss adjusting organizations established in accordance with law or experts having statutory qualifications, to carry out adjustments and appraisals as regards losses and damages resulting from the occurrence of insured events. The loss adjusting organizations or experts employed according to law to carry out adjustments and appraisals of insured events shall conduct their business impartially in accordance with law. Where losses or damages are caused to the insurer or the insured intentionally or by mistake, the organizations or experts shall bear the liability to pay compensation in accordance with law. The loss adjusting organizations employed according to law to carry out adjustments and appraisals of insured events shall collect charges in accordance with the provisions of laws, administrative rules and regulations. Article 124 An insurance company shall properly keep its complete account books, original vouchers as well as relevant material with respect to its business operations. The accounting books, original vouchers and other relevant material stipulated in the preceding paragraph should be kept for not less than 10 years beginning from the date of the termination of the contract. Chapter VI Insurance Agents and Insurance Brokers Article 125 An insurance agent is an entity or individual that has been authorized by an insurer to transact insurance business on its behalf within the scope of authorization and gets in return agent’s handling fees to be collected from the insurer. Article 126 An insurance broker is an entity that, in the interest of the applicant, provides intermediary services between the applicant and the insurer for the conclusion of an insurance contract and receives a commission therefor in accordance with law. Article 127 Where the insurer authorizes an insurance agent to transact insurance business on its behalf, it shall sign an agreement to such an effect with the insurance agent, in which the rights and obligations of both parties and other agency matters are agreed upon according to law. Article 128 The insurer shall be liable for the acts of its agents when they transact insurance business on behalf of the insurer in pursuance of the authorization. Where an insurance agent, when transacting insurance business on behalf of the insurer, oversteps the authority delegated and the applicant has good reason to believe that it has the authority of agency, and has concluded an insurance contract with it, it shall bear the insured liability. However, the insurer may, in accordance with law, investigate the responsibility of the insurance agent that oversteps the authority delegated to it. Article 129 When transacting life insurance business, no individual insurance agents may accept authorization from two or more insurers concurrently. Article 130 An insurance broker shall be liable for loss or damages caused to the applicant or the insured due to his fault in the course of transacting insurance business. Article 131 When transacting insurance business, no insurance agents or brokers may commit any of the following acts: (1) deceiving the insurer, applicant, insured or beneficiary; (2) concealing material information with respect to the insurance contract; (3) preventing the applicant from fulfilling his obligation of making a full and accurate disclosure, or inducing the applicant not to fulfill his obligation of making a full and accurate disclosure; (4) promising to give the applicant, the insured or the beneficiary benefits other than the ones provided for in the insurance contract; or (5) by taking advantage of the administrative powers and position, or of the occupational facilities, or by employing other illegitimate means, coercing or inducing the applicant to enter into an insurance contract. Article 132 An insurance agent or an insurance broker shall meet the qualification requirements prescribed by the insurance supervision and control authority and shall obtain an insurance agent license or an insurance broker license, issued by the insurance supervision and control authority, with which to register with the industry and commerce administration authorities, get a business license therefrom and pay a guarantee deposit or buy insurance to cover professional liability. Article 133 An insurance agent or an insurance broker shall have his own business site, set up special account book for keeping revenue and expenditure in connection with the business of the insurance agent or the insurance broker, and shall be subject to the supervision of the insurance supervision and control authority. Article 134 The service fees for insurance agents and commissions for insurance brokers shall only be paid to the legally qualified insurance agents and insurance brokers, not to any other persons. Article 135 An insurance company shall keep a register of its insurance agents. Article 136 Insurance companies shall improve training and management of the insurance agents to enhance their professional ethics and competence, and they may not instigate or mislead them to conduct or into conducting activities in violation of the obligation of good faith. Article 137 The provisions of Articles 109 and 119 of this Law shall apply to insurance agents and insurance brokers. Chapter VII Legal Liabilities Article 138 An applicant, an insured or a beneficiary, who commits insurance fraud by means of any of the following acts, which constitutes a crime, shall be investigated for his criminal responsibility in accordance with law: (1) in the case of the applicant, deliberately falsifying the subject matter of the insurance and swindling the insured amount out of the insurer; (2) falsely alleging the occurrence of an insured event which in fact has not occurred, and swindling the insured amount out of the insurer; (3) deliberately causing the occurrence of an event which leads to property damage and obtaining the insured amount by fraudulent means; (4) deliberately causing the occurrence of such insured events in the insurance of the person as death of the insured, injury and disability, or illness and obtaining the insured amount by fraudulent means; whereupon an insurance claim is fraudulently made; or (5) forging or tampering with certifications, data or other evidence related to the occurrence of the insured event, or abetting, instigating or bribing others to adduce false evidence, data, or other proofs, or cooking up the cause of the occurrence of the insured event or overstating the extent of loss, thereby obtaining the insured amount by fraudulent means. Administrative sanctions shall be imposed in accordance with the relevant regulations of the State if the circumstances attending any of the acts listed in the preceding paragraphs are minor and do not constitute a crime. Article 139 Where an insurance company or one of its staff members, when transacting insurance business, conceals material information with respect to the insurance contract, and deceives the applicant, the insured or the beneficiary, or where the insurance company refuses to fulfill its obligation agreed to in the insurance contract to pay indemnity or insurance benefits, which constitute a crime, the insurance company shall be investigated for criminal responsibility in accordance with law. If the violation is not serious enough to constitute a crime, the insurance supervision and control authority shall impose on the insurance company a fine of not less than 50,000 yuan but not more than 300,000 yuan; the staff member who violates the law shall be fined not less than 20,000 yuan but not more than 100,000 yuan; and if the circumstances are serious, restrictions shall be imposed on the business scope of the insurance company or the company shall be instructed to cease accepting new insurance business. An insurance company or one of its staff members that prevents the applicant from fulfilling his obligation of making a full and accurate disclosure, or induces the applicant not to fulfill his obligation of making a full and accurate disclosure, or promises to give unlawful premium rebates or other benefits to the applicant, the insured or the beneficiary, which constitutes a crime, shall be investigated for criminal responsibility in accordance with law; if the violation is not serious enough to constitute a crime, the insurance company shall be instructed by the insurance supervision and control authority to make rectification and shall be fined not less than 50,000 yuan but not more than 300,000 yuan; the staff member who violates the law shall be fined not less than 20,000 yuan but not more than 100,000 yuan; and if the circumstances are serious, restrictions shall be imposed on the business scope of the insurance company or the company shall be instructed to cease accepting new insurance business. Article 140 Where an insurance agent or an insurance broker deceives the insurer, the applicant, the insured or the beneficiary in his business operations, which constitutes a crime, the insurance agent or the insurance broker shall be investigated for criminal responsibility in accordance with law; if the violation is not serious constitute a crime, the insurance supervision and control authority shall instruct him to make rectification and impose upon him a fine of not less than 50,000 yuan but not more than 300,000 yuan; and if the circumstances are serious, the business license of the insurance agent or the insurance broker shall be revoked. Article 141 Where an insurance company or one of its staff members deliberately fabricates the occurrence of an insured event and falsely settles a fictitious claim, thereby swindling the insured amount, which constitutes a crime, the insurance company or the staff member shall be investigated for criminal responsibility in accordance with law. Article 142 Anyone who, in violation of the provisions of this law, establishes an insurance company or illegally engages in commercial insurance business shall be outlawed by the insurance supervision and control authority; if the violation constitutes a crime, he shall be investigated for criminal responsibility in accordance with law; if the circumstances are not serious enough to constitute a crime, his unlawful gains shall be confiscated by the insurance supervision and control authority, and he shall be fined not less than the amount of, but not more than five times the amount of, the unlawful gains; and if there are no unlawful gains or the amount of the unlawful gains is less than 200,000 yuan, he shall be fined not less than 200,000 yuan but not more than one million yuan. Article 143 Where an insurance company, in violation of the provisions of this law, engages in insurance business beyond the scope of business approved or concurrently engages in the business other than that provided for by this Law, or other laws, or administrative rules and regulations, which constitutes a crime, it shall be investigate for criminal responsibility in accordance with law; if the circumstances are not serious enough to constitute a crime, the insurance supervision and control authority shall instruct the insurance company to make rectification and to return the premiums collected, shall confiscate its unlawful gains and shall impose on it a fine of not less than one time the amount of, but not more than five times the amount of, its unlawful gains; and if there are no unlawful gains or the amount of the unlawful gains is less than 100,000 yuan, it shall be fined not less than 100,000 yuan but not more than 500,000 yuan; and if the insurance company fails to make rectification within the specified time limit or if the consequences are serious, the said authority shall instruct it to suspend business operation for rectification or revoke its insurance business license. Article 144 Whoever, in violation of the provisions of this Law and without being approved, arbitrarily makes changes in the name, articles of association, registered capital of the insurance company, its business site or that of its branches, shall be subject to the direction of the insurance supervision and control authority for correction and the imposition of a fine of not less than 10,000 yuan but not more than 100,000 yuan. Article 145 Whoever, in violation of the provisions of this Law, commits any of the following acts, shall be subject to the direction of the insurance supervision and control authority for correction and the imposition of a fine of not less than 50,000 yuan but not more than 300,000 yuan; where the circumstances are severe, the insurance supervision and control authority may restrict the scope of business, direct the company to cease accepting new business or re
voke the insurance business license: (1) failing to set up a guarantee fund as required or using the guarantee fund in violation of the provisions; (2) failing to set aside or carry forward all the liability reserve funds, or set aside an outstanding loss reserve, as required; (3) failing to contribute to the insurance guarantee fund or the accumulated reserve fund as required; (4) failing to effect outward reinsurance as required; (5) employing the funds of the insurance company in violation of the provisions; (6) establishing branches or representative offices without approval; (7) carrying out a division or a merger of the company without approval; or (8) failing to submit for examination and approval the insurance clauses and premium rates for risks, as required. Article 146 Whoever, in violation of the provisions of this Law, commits either of the following acts, shall be subject to the direction of the insurance supervision and control authority to correct the wrong, and the imposition of a fine of not less than 10,000 but nor more than 100,000 yuan, if he/she fails to correct the wrong within a prescribed period of time: (1) failing to submit relevant reports, statements, documents and information as required; or (2) failing to submit for the record the insurance clauses and premium rates for risks, as required. Article 147 Where an insurance company, in violation of the provisions of this Law, commits one of the following acts, which constitutes a crime, it shall be investigated for criminal responsibility in accordance with law; if the circumstances are not serious enough to constitute a crime, the insurance supervision and control authority shall instruct the insurance company to make rectification and shall impose on it a fine of not less than 100,000 yuan but not more than 500,000 yuan; and if the circumstances are serious, the authority may impose restrictions on its scope of business, instruct it to cease accepting new insurance business or revoke its insurance business license: (1) submitting false reports, statements, documents and information; or (2) refusing to accept or hindering inspection and supervision conducted in accordance with law. Article 148 Whoever, in violation of the provisions of this Law, commits any of the following acts, shall be subject to the direction of the insurance supervision and control authority to correct the wrong, and the imposition of a fine of not less than 50,000 yuan but not more than 300,000 yuan: (1) underwriting insurance for the subject matter thereof in excess of its insurable value, where the circumstances are serious; or (2) underwriting life insurance where death is the prerequisite for the payment of the insurance benefits, for those who have no capacity for civil acts. Article 149 Any unit that, in violation of the provisions of this Law and without the license for insurance agent business or insurance brokerage business, illegally engages in insurance agent business or insurance brokerage business shall be outlawed by the insurance supervision and control authority; if the violation constitutes a crime, it shall be investigated for criminal responsibility in accordance with law; if the circumstances are not serious enough to constitute a crime, the said authority shall confiscate its unlawful gains and impose on it a fine of not less than the amount of, but not more than five times the amount of, the unlawful gains; and if there are no unlawful gains or the amount of the unlawful gains is less than 100,000 yuan, it shall be fined not less than 100,000 yuan but not more than 500,000 yuan. Article 150 With regard to the senior managers and other persons of an insurance company who are directly responsible for a violation of the provisions of this Law, which is not serious enough to constitute a crime, the insurance supervision and control authority may, on the merits of each case, give a disciplinary warning, instruct to have them replaced, or impose a fine of not less than 20,000 yuan but not more than 100,000 yuan. Article 151 Whoever, in violation of the provisions this Law, causes damage or loss to others, shall bear civil liability therefor in accordance with law. Article 152 An official who approves the application for establishment of an insurance company which does not meet the requirements stipulated by this Law, or approves the application for insurance agent or insurance broker which does not meet the requirements stipulated by this Law, or commits other acts by abusing their powers or neglecting their duties, which constitutes a crime, shall be investigated for criminal responsibility in accordance with law; and if the violation is not serious enough to constitute a crime, he shall be given administrative sanctions in accordance with law.
Chapter VIII Supplementary Provisions Article 153 The Maritime Code of the People’s Republic of Article 154 This Law shall be applicable to Chinese-foreign equity insurance companies, wholly foreign-funded insurance companies and branches of foreign insurance companies; where other laws and administrative rules and regulations provide otherwise, the provisions there shall prevail. Article 155 The State supports the development of insurance businesses, which facilitate agricultural production. Agricultural insurance shall be governed by other laws and administrative rules and regulations. Article 156 Insurance institutions not in the nature of insurance companies as provided by this Law shall be governed by other laws and administrative rules and regulations. Article 157 Insurance companies established prior to the implementation of this Law upon approval in accordance with the regulations of the State Council shall continue to exist. Those which do not fully meet the requirements stipulated in this Law shall satisfy the requirements within a prescribed period of time. Specific measures shall be formulated by the State Council. Article 158 This Law shall go into effect as of October 1, 1995. (Legislative Affairs Commission of the Standing Committee of the National People's Congress) |
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